The slide in global oil prices continued overnight Thursday with US futures settling under $US50 a barrel for the first time in four months as investor worries about a continuing oversupply of crude and related products more than offset continuing solid economic news from some of the world’s major economies.
US futures dipped under $US49 a barrel for a while overnight Thursday before recovering to end around $US49.25 a barrel, down more than 2% on the day.
In London Brent crude futures also fell more than 2% to settle around $51.90 a barrel, its lowest level since early December. prices regained the $US52 mark in after hours trading.
Driving the slide was continuing worries that the OPEC production cap deal reached last November (when prices were last around these levels), is not having a sustaining impact.
And this morning Reuters reported that the jockeying has resumed over the global glut with the newsagency saying that it had been told the Saudi’s warned that American shale oil producers would not get a ‘free ride’ on the back of the OPEC production cap which has boosted prices.
“Senior Saudi energy officials told top independent U.S. oil firms in a closed-door meeting this week that they should not assume OPEC would extend output curbs to offset rising production from U.S. shale fields, two industry sources told Reuters on Thursday,“ Reuters reported.
Speaking at this week’s big industry meeting in Houston on Tuesday, Saudi Arabia’s Energy Minister Khalid al-Falih said that there would be no “free rides” for U.S. shale producers benefiting from the upturn.
And so far the shale oil companies have had a wonderful ride.
US production continues to rise – hitting 9.088 million barrels last week and topping, for the first time in more than a year, the levels of a year ago – 9.078 million barrels. That was a rise of 55,000 barrels in a week.
As well US stocks of crude oil hit another high last week of 528 million barrels, up more than 8 million barres and natural gas stocks are now so high because of the warm winter in the US that companies are being forced to re-inject the gas into wells because they can’t store it or sell it.
Thursday night’s fall continued the trend from Wednesday when prices slid 5% and more in the biggest one day fall for a year.
Gold prices also weakened to just over $US1,200 an ounce and other commodity prices were softer.
The Aussie dollar again softened overnight Thursday and was trading just above 75 US cents in early Asian dealings Friday morning.
News of a big oil discovery on America’s northwest slope in Alaska by Spanish oil giant, Repsol, didn’t help sentiment, nor did news that Shell is selling most of its interests in the highly expensive Canadian oil sands for $US7.2 billion to concentrate on gas and deepwater projects. The oil sands are considered to be too expensive at current prices.
Also pressuring oil prices were expectations of interest rate hike next week by the US Federal Reserve, which has lifted the dollar against other currencies and hit commodity prices (because they are priced in US dollars and price rises make them more expensive to trade and hold).
Once the Fed meeting is out of the way prices could rebound – but if the Fed charts more possible rate rises this year in its end of meeting statements and other data releases early next Thursday morning, Sydney time, then commodity prices will remain unsettled.
